Tansy Shiptrade Inc v Elemento Ltd

Factual and Procedural Background

An urgent application was made by the first defendant, Company A, for consent to sell a cargo of crude oil from Venezuela, valued around US$100,000,000, currently located at or near The City of Singapore. The cargo was subject to an injunction granted by Judge Pelling on 7 January and varied on 14 January, which prevented disposition of the cargo or related bills of lading without agreement or court approval.

The claimant, Plaintiff, is a company incorporated in the Marshall Islands, represented by its sole director and an agent company. Company A, incorporated in Malta with offices in Malta and London, had previously been subject to a worldwide freezing order in related proceedings. The second defendant, Defendant, is an American citizen residing in London and the chief financial officer of Company A.

Background events include a July 2019 meeting between representatives of Plaintiff and Company A to discuss purchasing oil cargos from the Venezuelan state oil company (PDVSA) for onward sale. The parties disagree on the terms of their agreement: Plaintiff asserts an equal profit-sharing arrangement without written contract, while Company A contends Plaintiff was to provide capital or shipping services and that trades in Plaintiff’s name required approval or capital contribution.

Subsequent events involved Plaintiff discovering it had been named as shipper or consignee on bills of lading for the cargo without its prior knowledge or consent, raising concerns about liability to PDVSA and the vessel owner. An agreement was reached on 24 December between Plaintiff and Company A, guaranteeing Plaintiff would not take action against the vessel or cargo and addressing the validity of certain bills of lading. However, Plaintiff did not receive original bills of lading as required and disputes arose over the title and liability concerning the cargo.

Further correspondence revealed that PDVSA had terminated the earlier sale recaps with Plaintiff and issued new sale recaps to a third party, Company B, associated with Company A. Plaintiff remained concerned about potential liabilities and sought injunctive relief, which was granted on 7 January and varied on 14 January to maintain restrictions on sale or disposition of the cargo without mutual consent and payment of proceeds into escrow.

Company A proposed a sale contract to sell the cargo to Company C, which included terms for partial payment to the vessel owner and payment of the remainder into escrow or court. The court heard an urgent application by Company A seeking consent to amend the injunction order to permit this sale.

Legal Issues Presented

1. Whether the court should amend the existing injunction order to permit Company A to conclude a sale of the cargo under the proposed terms.
2. Whether the proposed sale terms sufficiently protect Plaintiff’s interests, including ensuring sale proceeds are paid into escrow or court.
3. The extent of Plaintiff's liability and rights in relation to the cargo, given the disputed contractual arrangements and bills of lading.
4. Whether the balance of convenience favors permitting the sale under the proposed terms or maintaining the injunction to prevent dissipation of assets.
5. Issues relating to compliance with sanctions affecting the trade and disposal of proceeds.

Arguments of the Parties

Company A's Arguments

• Company A contends that Plaintiff had authorized use of Plaintiff’s name for Venezuelan oil trades and that the cargo sale is consistent with prior agreements.
• The proposed sale to Company C is commercially reasonable and includes safeguards such as payment into escrow and a contractual lien over the cargo.
• Letters of credit are unavailable due to US sanctions, so the proposed sale terms reflect current market realities for Venezuelan oil transactions.
• Company A asserts that Plaintiff has no real exposure to liability due to performance bonds and guarantees provided on Plaintiff’s behalf.
• Company A claims no alternative sale offers have been presented by Plaintiff and suggests the sale to Company C should proceed if no better offer emerges.

Plaintiff's Arguments

• Plaintiff disputes Company A’s authority to enter into transactions in Plaintiff’s name without approval or remuneration.
• Plaintiff asserts it faces real liability to PDVSA and the vessel owner due to bills of lading issued without its consent and possible breach of contract by Company A.
• The proposed sale contract terms are inadequate to protect Plaintiff’s interests, particularly concerning transfer of title before payment and the risk of dissipation.
• Plaintiff proposes conditions for any sale, including discharge into neutral storage tanks, avoidance of admixture, and title passing only upon full payment with joint authorization.
• Plaintiff questions the genuineness of the charterparty and the accruing demurrage charges, which remain unclear and potentially inflated.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Delta Kanaris Special Maritime Enterprise and Delta Harmony Special Maritime Enterprise -v- Elemento Limited [2019] EWHC 2875	Risk of dissipation justifying maintenance of freezing order; misuse of corporate structures to avoid enforcement of judgments.	The court relied on this precedent to find that Company A had previously shown a willingness to misuse corporate structures and that there was a real risk of dissipation of assets, supporting continuation of restrictive orders.
American Cyanamid Co v Ethicon Ltd [1975] AC 396 (referred to as "American Cyanamid approach")	Framework for granting interlocutory injunctions: serious question to be tried, balance of convenience, and preservation of status quo.	The court applied this approach to assess whether the injunction should be varied to permit the proposed sale, considering the strength of Plaintiff’s case and balance of justice.

Court's Reasoning and Analysis

The court began by applying the American Cyanamid principles, finding that Plaintiff raised a serious question to be tried with a real prospect of success, particularly concerning Company A’s breach of contract and unauthorized use of Plaintiff’s name in transactions.

In weighing the balance of convenience, the court acknowledged the prior injunction intended to preserve the cargo or its proceeds pending resolution, requiring sale proceeds to be paid into escrow or court. Company A accepted the importance of escrow arrangements.

The court examined the proposed sale contract and identified several concerning features: transfer of cargo via ship-to-ship delivery allowing potential disappearance of the cargo; transfer of title before payment; a payment window after discharge creating risk of dissipation; reliance on contractual liens and retention of title provisions enforceable only through third parties not before the court; potential for admixture defeating liens; and the possibility of unilateral variation of terms between third parties.

The court also noted uncertainties about the separate cargo proposed as additional security, including lack of evidence of its existence or value and concerns about the reliability of the proposed buyer, Company C.

Regarding liability, the court found that Plaintiff may face real exposure to PDVSA and the vessel owner despite performance bonds and guarantees, as there was no clear evidence of release from liability. The court rejected Company A’s submission that Plaintiff’s lack of substantial assets negated exposure, emphasizing reputational and commercial risks to Plaintiff’s principals.

The court considered the accruing demurrage and other liabilities but found that the risks of dissipation under the proposed sale terms outweighed these concerns.

Ultimately, the court concluded that the terms of the proposed sale contract did not provide sufficient assurance that sale proceeds would be secured in escrow as required by the existing injunction order.

Holding and Implications

The court REFUSED Company A’s application to amend the injunction order to permit the proposed sale of the cargo under the terms submitted.

This decision maintains the existing injunction protecting the cargo and its proceeds, requiring any sale to ensure that proceeds are paid into escrow or court to prevent dissipation. The refusal reflects concerns over the security of the proposed transaction, the risk of dissipation, and unresolved liability issues. No new precedent was established; the ruling applies the established principles of interlocutory injunctions and asset preservation in the context of complex commercial disputes involving sanctions and disputed contractual authority.